Following a decision to commit $60 million in capital investment to the Macquarie Asia Investment Fund (MAIF) last September, the New Mexico State Investment Council (NMSIC) voted in favor of increasing that commitment by $40 million to a total of $100 million on Tuesday.
All but one of the present members voted in favor of the proposal.
“There's a lot of investment here that's contingent on government policies, I'm not really comfortable that we have our hands around all of that,” the dissenting board member said in explanation of his reservation.
The vote followed unanimous approval of the recommendation by the 15-member Council Investment Committee at their most recent meeting on Thursday, March 12.
Martin Rosenberg, a principal of the Townsend Group who was among those advising the council on the decision, said that he and his fellow advisors see the Macquarie Asia Infrastructure Fund as “one of the best risk-adjusted returns on the market.”
“The thesis that underlies the recommendation for the additional $40 million is actually the same as the thesis that drove the original recommendation; this is a very experienced team with about 50 infrastructure professionals on the ground, and every Asian market being targeted supported by a very deep platform at Macquarie and with a strategy that we think is attractive,” Rosenberg said.
He also pointed out that similar funds targeting other geographies, such as Europe and the US, are becoming crowded with investors looking to get in the door, and that such market saturation isn't currently occurring to the same degree in Asia.
While the original $60 million commitment was introduced on a no-fee basis, the additional commitment will be assessed for fees separately, with the terms of this fee structure to be determined at a later date, Rosenberg indicated.
Committee member Geraldine Barlow noted in the March 12 meeting that the opportunity to raise NMSIC's commitment to the fund was presented by the decision to increase investment into real assets to 12 percent from the previous 10 percent allocation.
Favorable conditions in market supported the committee's decisions, with Jack Koch of Townsend pointing to attractive opportunities being accessed by the fund. These have included investments in Indian toll roads and a power plant in the same country, which according to a fund representative at the March 24 meeting, comes with a 50-year power generation contract including 20 years of coal provision and an expected IRR of 19.5 percent.
That representative also noted that some of the strong points of the fund's strategy include its diversity – with no more than 33 percent of the fund going into any one nation – supported by a team of professionals on the ground in key markets such as Singapore. He explained that while the fund will take moderate risks, 80 percent of managed capital will be invested into operating companies.
“In developed countries – Japan and Korea – we would take a little more operating risk,” he said. “In developing countries, China and India, [we'll] take less operating risk at the asset level.”
MAIF reported raising roughly $1.1 billion at first close in October last year, and a representative in the meeting indicated that the fund has received three additional confirmed commitments since, with “a few more” potential commitments by May. It is Macquarie 's first pan-Asian fund, and reports targeting core and core-plus infrastructure investments located in investment grade markets in Asia with a focus on India, China, Korea and Australia.
Along with its original commitment of $60 million to MAIF in September 2014, NMSIC also allocated $50 million each to the FIA Timber Growth and Value Partners Fund managed by Forest Investment Associates, the NGP Natural Resources XI fund managed by NGP Energy Capital Management, and the Bridgepoint Europe V private equity buyout fund.